Sir Christopher Meyer faces fresh calls for his resignation as chairman of the Press Complaints Commission after an Independent on Sunday investigation found he took a job with a scandal-hit US bank, despite repeated warnings about its activities.

The embattled former British ambassador to Washington told the IoS yesterday he accepted a $25,000-a-year post on the board of Riggs Bank in July 2003. At the time, the bank was the subject of a Congressional inquiry, and has been rocked by a series of high-profile scandals.

Riggs was fined £17m for its handling of accounts held by the President of Equatorial Guinea, the target of a botched coup last year. The bank has also been censured for hiding suspicious accounts belonging to the former Chilean dictator General Augusto Pinochet, worth hundreds of millions of dollars. The US Justice Department is making several criminal investigations into the bank. Sir Christopher insisted he knew nothing of the questions about the bank's conduct when he took up the post. He resigned as an independent director in March 2004 after his questions about its activities in Equatorial Guinea went unanswered.

The former ambassador has run into an extraordinary backlash after the publication of his explosive memoirs, DC Confidential, dismissing senior Labour figures as "political pygmies". John Prescott, the Deputy Prime Minister, called him a "fop in red socks" in a leaked letter calling on him to stand down.

Senior Labour politicians have seized on the Riggs revelations. "Why did Sir Christopher not carry out proper checks before he joined this bank?" said Denis MacShane, the former Europe minister. "His failure can only further undermine confidence in his judgement."

Another former minister, Lord Foulkes, said: "If Sir Christopher had spent a little more time doing his homework about this bank and less collecting tittle-tattle for his book he would not be in this embarrassing position. His lack of judgement has placed a cloud over the PCC which only his resignation can clear."

But Sir Christopher said: "To put it mildly, I had some good contacts in Washington, and went to all those, and nobody suggested that it was something wrong. If anything, they said it was a bit old-fashioned, blue-blooded, conservative, and needed shaking up and bringing into the real world.

"You would have thought that due diligence would have thrown something up. With hindsight, there was something, but I thought it was to do with the State Department."

When he joined, a Congressional sub-committee was investigating Riggs, and several media reports criticised the bank's activities. In 2000, a UK newspaper had reported that General Pinochet had $1m in a Riggs account in the US.

In 2002 and 2003, Riggs was named in media reports about questionable transactions involving officials from Saudi Arabia and Equatorial Guinea. And since 1997, the US banking regulator had repeatedly warned Riggs that there were "fundamental, long-standing deficiencies" in its "dysfunctional" anti-money laundering compliance. The month Sir Christopher joined, the watchdog ordered the bank to revamp its money-laundering safeguards.

Sir Christopher said: "The Equatorial Guinea thing blew up almost exactly coincident with my arriving on the board. I was asking some very pointed questions about all that, and to be perfectly frank, that was the principal reason for my leaving." He said he had no knowledge of the bank's relationship with General Pinochet. "That came as a bolt from the blue after I had left."

Asked whether the episode cast doubt on his judgement, he said: "I am not saying I'm perfect... Like any other human I make errors of judgement."